What is a foreign company ADR?

ADRs are U.S. dollar-denominated certificates that trade on American stock exchanges and track the price of a foreign company's domestic shares. ADRs represent the prices of those shares but do not grant you ownership rights as common stock typically does. Why Do Foreign Companies List ADRs?

How does ADR trading work?

ADR trading is cleared through U.S. settlement systems. This means that ADRs are easy to trade and track, eliminating foreign taxes, currency conversions and direct communication with foreign companies. Investors can diversify their portfolios with international stocks using ADRs.

Do I have a right to own an ADR?

When you own an ADR, you have the right to obtain the foreign equity it represents, although most U.S. investors find it easier to own the ADR. For example, let's say that the shares of CanCorp (a fictitious Canadian company) sell on the Toronto Stock Exchange for C$5.75 (US$5).